Tri-Cities housing market gets off to cold start, but one-month doesn’t make a trend


Tri SalesPPThere was a decidedly negative tone to news and commentary about January’s housing report. A winter that is nowhere near normal caused many buyers to hunker down at home so sales were down. Affordability has taken a hit, interest rates are higher and some areas have a crimped inventory.

Chief economist Lawrence Yun of the National Association of Realtors (NAR) said, “There is credit difficulty, affordability difficulty and a lack of inventory. Weather plays a part in it, but is probably only one-third or less.”

But hold on a second. If all real estate is local step back from the cold, gloom, doom from the national report, and look at the local markets.

Yes, sales were down from December. But that’s normal. When you look a little deeper at the Tri-Cities numbers, last month was the best January sales month since January 2008.

Tri pricesPPBreak the Tri-Cities into its two MSA components and you see the Johnson City MSA was clearly the driver for the regional market performance. According to the National Home Builders Association Leading Markets Index, the Johnson City MSA is performing 33 percent above its historic sustained performance level. Home prices, new single and multi-family construction is driving that industry group’s index and making up for the MSA’s lack luster job creations.

That three-county area’s sales took a minor hit from December, and yes they were at a nine-month low. But they soared above the numbers from previous January reports. A total of 128 homes were sold last month compared to 99 in 2013 and 84 in January 2012. Last month’s sales were two homes better than the pre-recession benchmark and only the second month in the six years when they have been in double digits.

JC salesPPThe picture wasn’t quite as positive in the four-county Kingsport-Bristol MAS. Sales were down by 40 homes from December and at a 10-month low. Still they were only one shy of the January 2012 total.

Why were sales at 10 and nine month lows?  Simple. Not as many homes are sold in the fourth and first quarter as there are in the peak second and third quarters.

The thing to remember is one month doesn’t make a trend.

Housing affordability here is down a little from past years. The main reason is prices have increased.  And when you look at the Home Affordability Indexes for the local city markets all but two show the average family has better than 150% of the purchasing power necessary to buy an average priced home in their city. The exceptions are Erwin where the index is 101.1 and Bristol, Va. where the index is 128.2. That’s not enough to shut a big portion of buyers out of the market.

A check of local listing also show the inventory for homes for sale is increasing as they normally do after the holidays. Where the inventory is constrained in some price categories, the over-all supply of homes on the market is about normal.

One thing the local markets share with the national market is the need for more new home construction.

JC PricesPP“We need more construction,” says Yun, who explained that while this part of the sector has unquestionably been affected by weather, the drop is also because builders cannot easily get construction loans. “Let’s hope that this decline is a one-month phenomenon because there is a strong market incentive for the builders and the lenders to get the deals done and build more homes because of the lack of inventory on the market.”

But, while there’s all this focus on the things holding the market back, home prices keep increasing.

In the Tri-Cities area January’s average price was at a three-month high.

KB salesPPKingsport-Bristol’s average price was at a 12-month low. Prices are another area where the Johnson City MSA is making up from weaker market performance in Kingsport-Bristol. The Johnson City MSA average January price was at a four-month high. It has consistently outperformed its sister MSA all last year.

There are many variables that will affect home sales and prices as the local markets move toward the prime selling season. The charts with the report benchmark last month’s sales and prices against how the markets performed during the first six months of the past two years.

One thing in the Kingsport urban area’s favor is its inventory of higher-end homes is better than the Johnson City market.  It wasn’t that way last year.

Kb PricesPPThere are currently 58 new homes in one stage or another of construction in the Bristol market and there’s more in the planning stages. The same is the case in Kingsport. Since September. 38 new home permits have been pulled and builders are waiting for a break in the weather to do more. Johnson City builders are in the same boat. A total of 48 new home permits have been pulled since September. The permit numbers do not include February permit pulls.

The reference to the Tri-Cities region in this report is for the seven-county Tri-Cities Consolidated Statistical Area instead of the 11 county region monitored by NETAR’s Trends Report. NETAR’s report includes housing data from Lee and Wise counties in SW Va., Johnson and Greene counties in NE Tennessee.

 

© Don Fenley

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